Gold Hits Seven-Week High Above $4,295: Strait of Hormuz Deal Hopes, Weak Jobs Data, and a Weaker Dollar Fuel the Rally

Strait of Hormuz Deal Hopes — The Primary Catalyst

Qatar announced a draft proposal for an interim deal to reopen the Strait of Hormuz, which had been disrupted by the Iran conflict . The prospect of a deal directly weighed on oil prices — the strait is a key chokepoint for global crude — and eased inflation fears, reducing the expected need for aggressive Fed rate hikes . Both U.S. and Iranian officials signaled progress in talks, and Iran said it had reached an understanding with Oman on a proposed shipping route .

Falling Oil Prices Tempered Inflation Expectations

Optimism over the Hormuz reopening sent oil prices sharply lower, with crude slumping more than $4 a barrel in early August . Lower oil costs reduced the risk that the Fed would need to hike rates to combat energy-driven inflation, removing a key headwind for gold .

Weak U.S. Labor Data Shifted Fed Rate Expectations

The ADP private payrolls report for July came in weaker than expected, reducing the probability of a Fed rate hike at the September meeting . A softer labor market also pressured Treasury yields lower and the dollar weaker, both of which are bullish for gold .

The Weaker U.S. Dollar Boosted International Demand

The dollar index fell as the combination of a Hormuz deal (lower geopolitical risk) and soft jobs data drove expectations of easier Fed policy . A weaker dollar makes gold cheaper for non-U.S. buyers, boosting physical demand .

Shifting Fed Rate Expectations Lowered the Opportunity Cost

Markets repriced rate-hike odds lower: the Hormuz deal reduced inflation fears, and the weak ADP report reduced the urgency for tightening — both lowering the opportunity cost of holding non-yielding gold . Traders had previously priced in a 65% chance of a Fed rate hike in September .

Broader Precious Metals Gains Reinforced Bullish Sentiment

Silver rallied alongside gold, climbing 4.65% to $62.22/oz on the same session, and mining shares posted even larger gains . The gold-miners ETF GDX rose 7.39% and its junior counterpart GDXJ rose 7.42%, while the silver-miners ETF SIL added 6.59% . This broad-based strength in precious metals reinforced bullish sentiment for gold .

Gold ETF Inflows Provided a Steady Demand Base

Global physically backed gold ETFs saw sustained inflows for multiple consecutive months, adding $5.5 billion in August alone, with total AUM reaching a month-end record of $407 billion . ETF inflows provide a steady demand base that amplifies price moves during rallies.

Technical Breakout Triggered Additional Buying

Gold breached a key technical resistance level on August 5, sparking its biggest daily gain since February — a 5.03% jump to $4,277.69 . The break above resistance fueled additional buying from momentum and ETF flows .

Price Snapshot

Sources:

In short, the Strait of Hormuz deal hopes acted as the primary catalyst that simultaneously lowered oil prices, inflation expectations, and rate-hike bets, while the weak ADP jobs report added independent dovish pressure on the dollar and yields. These forces converged to push gold through a key technical resistance level, triggering additional buying from momentum and ETF flows .